Imagine suffering from a disability that makes it practically impossible to work. It’s likely you’d need any help that comes your way, including Supplemental Security Income (SSI) and Medicaid.
Now, imagine you manage to accrue $2,000 in a savings account through your efforts, or with help from friends and family. But then, once you reached that amount, you’re no longer eligible for SSI or Medicaid.
It doesn’t seem right that you can’t save for your future without jeopardizing your present. That’s exactly the problem ABLE accounts are designed to fix.
What are ABLE accounts?
The Achieving a Better Life Experience (ABLE) Act of 2014 was passed to allow disabled Americans to save for the future without risking their other federal benefits. It allowed states to establish savings accounts similar to 529 college savings funds. In fact, ABLE accounts are designated as 529As.
As with college savings plans, ABLE accounts can be established on behalf of beneficiaries. This structure is important in cases where a caretaker might not be around later, and someone with a disability needs to prepare for future costs.
While states are responsible for ABLE account administration, it’s important to note that you don’t have to be a resident of a state to take advantage of its program, just as with a college 529 plan. The National Down Syndrome Society follows state and federal ABLE-related legislation and has a list of states that offer 529A accounts.
Who can establish a 529A?
You can open an ABLE for yourself, your child, or another beneficiary, but in all cases, the person receiving the funds must meet the four eligibility requirements.
- Your condition must be a physical or mental impairment that is medically determinable. It must result in severe functional limitations, or you must be blind.
- The disability must be expected to last for at least 12 months or result in death (this includes certain cancers and brain disorders).
- Blindness or disability must have occurred before your 26th birthday.
- You must have a copy of a physician’s diagnosis of the condition. While you don’t need the diagnosis in hand to open the 529A, you still need to obtain it so that you can provide a copy to the IRS or the ABLE program upon request.
ABLE accounts are also subject to continued monitoring by tax year. You might need to recertify, depending on the impairment.
What are the limits of ABLE accounts?
How much you can contribute to an ABLE account is determined by the gift tax exclusion. For tax years 2013 to 2017, the exclusion is $14,000. However, Bloomberg BNA expects that amount to increase to $15,000 for the 2018 tax year.
Money to an ABLE account is contributed after-tax, but the funds grow tax-free as long as you use withdrawals for legitimate expenses (more on this below). As with 529 college savings plans, many states offer investment options so that the money in a 529A can grow faster. Realize, though, that you can’t roll regular 529 funds into a 529A.
It’s also important to note that once an ABLE account exceeds a value of $100,000, the SSI benefit received by the beneficiary is suspended until the 529A account value drops back below that amount. However, Medicaid eligibility is not impacted by the size of the ABLE account.
Finally, realize that upon a beneficiary’s death, other parties can have claims on the remaining money in a 529A. First, outstanding qualified disability claims are satisfied. Then, the beneficiary’s state of residence has the option claim money in the account for a Medicaid payback. A state can claim an amount that equals what it spent through its Medicaid program since the account’s establishment date. After those payments, any money left over goes to the beneficiary’s estate.
What are qualified disability expenses?
Withdrawals from ABLE accounts are tax-free, but they’re expected to be for the benefit of the eligible individual and cover “qualified disability expenses.” According to the Social Security Administration, the following items meet that designation:
- Housing (including utilities, insurance, and property taxes)
- Health care
- Prevention and wellness
- Assistive technology and related services
- Employment training and support
- Legal fees
- Financial management
- Administrative services
- Expenses related to ABLE account oversight and monitoring
- Basic living expenses
- Funeral and burial costs
Using the money for unqualified expenses can lead to the payment of income tax plus a 10 percent penalty, as with a 529 college savings account.
Benefit from an ABLE account
If you are caring for a disabled individual, or if you have a disability yourself, an ABLE account can be one way to save money for expenses and care.
Interested in refinancing student loans?Here are the top 6 lenders of 2020!
|Lender||Variable APR||Eligible Degrees|
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|3.18% – 6.06%5||Undergrad & Graduate|
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1 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Splash Financial loans are available through arrangements with lending partners. Your loan application will be submitted to the lending partner and be evaluated at their sole discretion. For loans where a credit union is the lender, or a purchaser of the loan, in order to refinance your loans, you will need to become a credit union member.
The Splash Student Loan Refinance Program is not offered or endorsed by any college or university. Neither Splash Financial nor the lending partner are affiliated with or endorse any college or university listed on this website.
You should review the benefits of your federal student loan; it may offer specific benefits that a private refinance/consolidation loan may not offer. If you work in the public sector, are in the military or taking advantage of a federal department of relief program, such as income based repayment or public service forgiveness, you may not want to refinance, as these benefits do not transfer to private refinance/consolidation loans.
Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of May 1, 2020.
Fixed APR: Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed Rate options range from 2.88% (without autopay) to 7.27% (without autopay) and will vary based on application terms, level of degree and presence of a co-signer. Rates are subject to change without notice. Fixed rate options without an autopay discount consist of a range from 2.88% per year to 6.21% per year for a 5-year term, 3.40% per year to 6.25% per year for a 7-year term, 3.45% to 5.08% for a 8-year term, 3.89% per year to 6.65% per year for a 10-year term, 4.18% per year to 5.11% per year for a 12-year term, 4.20% per year to 7.05% per year for a 15-year term, or 4.51% per year to 7.27% per year for a 20-year term, with no origination fees. The fixed interest rate will apply until the loan is paid in full (whether before or after default, and whether before or after the scheduled maturity date of the loan).
Variable APR: Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Variable rate options range from 1.99% (with autopay) to 7.10% (without autopay) and will vary based on application terms, level of degree and presence of a co-signer. Our lowest rate option is shown with a 0.25% autopay discount. Our highest rate option does not include an autopay discount. The variable rates are based on the Variable rate index, is based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of April 27, 2020, the one-month LIBOR rate is 0.43763%. The interest rate on a variable rate loan is comprised of an index and margin added together. The margin is a fixed amount (disclosed at the time of your loan application) added each month to the index to determine the next month’s variable rate. Variable rate options without an autopay discount consist of a range from 2.01% per year to 6.30% per year for a 5-year term, 4.00% per year to 6.35% per year for a 7-year term, 2.09% per year to 3.92% per year for a 8-year term, 4.25% per year to 6.40% per year for a 10-year term, 2.67% per year to 4.56% per year for a 12-year term, 3.44% per year to 6.65% per year for a 15-year term, 4.75% per year to 6.93% per year for a 20-year term, or 5.14% per year to 7.10% for a 25-year term, with no origination fees. APR is subject to increase after consummation. Variable interest rates will fluctuate over the term of the borrower’s loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a co-signer. The maximum variable rate may be between 9.00% and 16.00%, depending on loan term. The floor rate may be between 0.54% and 4.21%, depending on loan term. These rates are subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.
Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.
Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.
Interest Rate: A simple annual rate that is applied to an unpaid balance.
Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of June 23, 2020. Information and rates are subject to change without notice.
3 Important Disclosures for SoFi.
4 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 2.98% APR (with Auto Pay) to 5.79% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 5.64% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of July 31, 2020, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 7/31/2020. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.
© 2020 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.18% effective July 10, 2020.